The Profitability Index Will Be

question 178

Multiple Choice

The profitability index will be:

• A) Greater than 1.0 whenever the net present value is negative.
• B) Negative any time the net present value is negative.
• C) Less than 1.0 any time the discount rate is less than the IRR.
• D) Equal to 1 any time the IRR is less than the discount rate.
• E) Greater than 1.0 when the IRR is greater than the discount rate.

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Definitions:

Fixed Costs

Costs that remain constant in total regardless of changes in levels of activity or volume of output within a certain range.

Product Dropping

The process of discontinuing a product from a company's offerings, often due to poor sales, shifting market demands or strategic realignments.

Traceable Fixed Costs

Fixed costs that can be directly linked to a specific product, service, or segment of a business.

Joint Products

Multiple products that are produced from the same process or material inputs, where separation of the products occurs at a split-off point.